China was a tempting location for StemCultures to offshore its manufacturing to, but this Rensselaer company abandoned its exploration to do so despite already offshoring parts of its operations to other countries.
StemCultures is a small venture partnered with the Neural Stem Cell Institute (NSCI) to make and sell cell growth factors to scientists around the globe for cell biology research. The two work within an evergreen model so NSCI’s discoveries can be licensed to StemCultures for sales and distribution.
The company’s revenue is then funneled back into the institute’s ongoing research and development.
StemCultures offshored some of its sales and distribution operations to Japan, South Korea and countries in Europe several years ago. Offshoring is when a company moves its services or logistics abroad to reduce costs.
Chief Executive Officer Jeffrey Stern said it was “difficult” selling directly to end-users in those countries because of customs delays and challenges.
In a place like Japan where each region has its own distributors far more familiar with navigating the complicated customs process and getting products to customers efficiently, Stern figured it best to utilize them.
StemCultures is “too small of a company” to have its own people in other countries guiding products through, Stern said. So, it sells products to offshore distributors at a discounted price, roughly 10 or 20 percent less than its retail cost, and leaves the rest to them.
Stern finds the end result to be rather interesting. After distributors purchase StemCultures merchandise at a lower rate, they mark the price up 20 or 30 percent.
“The cost of the product to the end-user in Japan is significantly higher than it would be if they were purchasing directly from StemCultures,” Stern said.
Recently, Stern and his team have considered offshoring the company’s growth factor sourcing to China – a country he referred to as the “main source for less expensive biologics.”
China’s low-cost model was enticing, but StemCultures ultimately stepped away from its negotiations with manufacturers there for one reason: protection of trade secrets. In engineering StemBeads, Stern’s manufacturing and research and development teams are aware of many trade secrets that they prefer to keep “close to the vest,” Stern explained.
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